‘Black Death’ of eurozone crisis will hit exports – China

Tuesday, August 23, 2011

By Paul Martin

The “Black Death” of the debt crisis across the euro zone will hurt China’s exports, although Beijing’s relatively small holdings of euro assets will limit damage to foreign exchange reserves, the nation’s top official newspaper said on Monday.

The bleak diagnosis for the euro appeared in the overseas edition of the People’s Daily, the main newspaper of China’s ruling Communist Party, in a commentary by a former central bank official and an economist for the state-owned China Development Bank.

“The euro debt crisis has now been going for nearly two years since the end of 2009, and the sovereign debt crisis has spread like the Black Death of the fourteenth century across the euro zone countries,” said the commentary, referring to the rodent-borne pandemic that devastated Europe.

Although the commentary in the People’s Daily does not reflect a definitive view from China’s most senior leaders, it and other comments in the official press suggest the euro zone’s successive crises have caused anxiety and debate in Beijing about the impact on China.

“The spread of the euro debt crisis will not have as large an impact on our country’s foreign exchange reserves as the U.S. sovereign debt downgrade, because euro assets make up far less of our country’s foreign exchange reserves than the dollar,” wrote Zhang Zhixiang, a former head of the People’s Bank of China international department, and Zhang Chao, an economist for the China Development Bank.

“But the euro debt crisis will lead to a decline in real demand that will have a far-reaching impact on our country’s real economy,” they wrote.